The founder of the world's biggest hedge fund has 3 principles to create a more successful life

Ray Dalio is the founder and co-chairman of Bridgewater Associates. Brian Snyder/Reuters

Ray Dalio is the founder the world's largest hedge fund.

He follows principles in his life, and in business, to be successful.

Anyone can learn from them to become more satisfied with their own lives.

A few principles include: align your direction with your innate nature, use a five-step process to make decisions, and be transparent.

Bridgewater Associates is the world's largest hedge fund. They manage over $150 billion.

In the past decade, a lot has been written about them. They have a very unorthodox method of operation. Almost to the point where many outsiders claim that they function like a cult.

They're known for their policies of radical honesty and openness, which means that every employee is always expected to say what they think. It's a culture that tolerates mistakes but doesn't believe in hiding them. It values each opinion but doesn't accept sugarcoating.

Naturally, not everyone feels comfortable working there, and almost 30% of new hires leave within a year. Those that do stay, however, tend to stay there for the very long-term.

Their founder is a man named Ray Dalio. He is among the wealthiest people in the world, and it's his influence that has allowed them to operate as effectively as they have done.

His Principles are famous in the investing world and beyond. They're a set of rules and algorithms that he has created for himself and his firm to ensure that they are getting the most out of their effort. In fact, he attributes much of his performance record to them.

While some are unique to his experience, most of them can actually be applied quite broadly.

The thing about Dalio is that he's not just any investment manager. He's a deep thinker whose philosophy extends beyond just his own domain.

His principles are designed to work as rules for creating a good life, and some of his key ideas show precisely how to do that. Let's break down a few of them.

1. Align direction with your innate nature

Generally speaking, most perspectives about how to live life well fall into two categories on the opposite ends of the spectrum. Depending on your culture, one of the two dominates.

The first is achievement-based. This is a very common view in the west, and it essentially states that meaning comes from growth and impact. It accepts that things will be difficult, and it relies on a compromise for something greater than oneself. Something that leaves a mark.

The second is presence-based. This is more common in eastern cultures, and it contends that the joy in life grows from being in the moment and really enjoying the little day to day things that make life worth living. It's more concerned with smelling the roses if you will.

These aren't mutually exclusive, and many people do find a good balance between the two, but more often than not, for every person, one side is more appealing than the other.

One of the big things that Dalio has implemented at Bridgewater is ruthless testing. They test everything from strengths and weaknesses to personal preferences and life outlook.

A thing that he has consistently come across over the years is that while people are flexible and can adapt reasonably well to most situations, everybody is genetically conditioned to be motivated by certain things that are relatively ingrained in them and that are hard to change.

Some people are programmed to prefer contentedness, while others thrive on challenge.

Dalio believes that there is essentially a spectrum where one end is about savoring and enjoying life in presence, while the other side is about pushing oneself to make an impact.

The first step to living a good life is understanding where on that spectrum you lie. Once you know your innate nature, you can better choose the kind of goals that are meaningful to you.

2. Build a life machine from start to finish

Once the direction is set, according to Dalio, then it becomes a process of goal achievement.

You know what appeals to your nature, and the path forward is clearer, but even then there are still wants and needs demanding attention. You still have to choose how to invest your time.

Dalio has a five-step process for this. He sees any pursuit as a machine that has different parts interacting with itself to make it run better. By separating the parts individually into different compartments and periodically addressing them, he contends that anything is within reach.

The first step is choosing a goal. The second step is identifying and not tolerating problems. The third step is diagnosing any problems to the root cause. The fourth step is designing a plan to eliminate those problems. The fifth step is executing the established plan.

Anytime you feel confused or stuck during an effort to get what you want, you can go through these steps to see which individual part of the machine needs your attention.

By adequately optimizing this process, there is a high likelihood that you can align whatever it is that you need to do to improve your life with the actual requirements of reality.

Naturally, no one person excels at every one of these steps. We can improve our ability in each individual compartment, but everyone has their own unique strengths and weaknesses.

Some people are more visionary. They know what they'll want in the future, and they excel at setting goals. Others are better problem solvers. They can take an issue and really break it down. Few yet are competent executioners. They know how to turn a plan into reality.

The most effective people don't just hone their own skills at each step, but they also know how to compensate for their weaknesses by getting the right people to help them along the way.

3. Harness the power of full transparency

In day to day life, very few of us say what we think in our interactions with other people.

There are many reasons for this. Much of the time, what we think just isn't relevant to the situation, so it doesn't make sense to. Other times, there is a real cost to saying what we think. Insulting somebody isn't the best way to make friends. Nor is it a good way to live.

These inhibitions are understandable. That said, the most common reason that we aren't always honest, or that we tell white lies, is that we worry about bruising the ever-present ego.

We worry about hurting someone else's feelings (even if they are in the wrong) because we, ourselves, don't want others to similarly hurt our own feelings (even if we need to hear it).

In a TED Talk, Dalio showed the audience a work email he received as an example. It was from an employee below him in the company, but the email very bluntly stated how poorly prepared Dalio was for an internal meeting, and how it negatively affected everyone else.

In fact, it was so direct that most people would have been personally insulted by it. Dalio, however, claims that this is precisely what has enabled them to constantly improve.

In their culture, it's accepted that this isn't personal. It's about helping each other succeed.

Of course, this isn't feasible in every environment or interaction, but if you go out of your way to establish this expectation with either your team or the people closest to you, then you can be radically honest with them and be radically open-minded to feedback without the costs.

The result is an ability to bypass the harmful effects of an ego that doesn't tolerate criticism, and as a result, fails to improve and get better. It will also lead to kinder, deeper, and more meaningful relationships with those around you. That's the power of full transparency.

All you need to know

It's not always clear what the best route of action is at any given point. There are many ways to live a full life. That's good in that it provides options, but it's bad because choosing is hard.

Ray Dalio is not only one of the most accomplished people in his field, but he's also a great thinker. He has hundreds and hundreds of principles written down for exactly this purpose, and he recommends that people note their own so that they can make better choices.

Many situations in life arise again and again. Good mental models and principles can be applied to more than one instance, and they stop us from making the same mistake twice.

If you're diligent in keeping them in mind, there is no reason you can't optimize a good life.

Want to think and live smarter? Zat Rana publishes a free weekly newsletter for 20,000+ readers at Design Luck.